According to a study by the GSIA (The Global Sustainable Investment Alliance) the proportion of sustainable investing relative to total managed assets is 50% in Europe versus 25% in the United States but this is changing rapidly as more US managers adopt ESG strategies.
Although slow to jump on the ESG train, institutional investors are increasingly seeing ESG as part of their fiduciary duty. Beyond demonstrating their green credentials, ESG enables funds to enjoy proven financial benefits, such as improved worker productivity, risk mitigation and future regulation. Investor expectations are also rising as they favor funds that are smarter, cleaner and healthier. ESG provides investors with the data to identify companies that will perform well in the future and to avoid those that will not. An MCSI study showed firms that score highly in relation to ESG are better run, have stronger balance sheets and more loyal employees.
Fund managers know that ESG is much more than a marketing fad. The process has been much simplified with the continued improvements in technology which makes it easy for managers to apply ESG data to their fund information.
As an administrator, Centaur takes over the operational due diligence requirements for funds enabling the fund managers to focus on their core business of seeking out investment opportunities and returns. Our ability to provide bespoke services to our clients is a key part of our ESG credentials in this evolving environment. By making continued investments in new systems and people to keep pace with regulation and due diligence demands we are able to evolve with the ESG needs of managers and investors alike.
Historically, the fixed costs of performing due diligence on a small ticket was generally too costly and time consuming to be economically viable for both investor and manager. This has changed over the last few years with the increasing presence of administrators in the fund management process. Technology is the real game changer. With improved reporting and better transparency, due diligence has become more sophisticated and reviews more detailed than ever before. The individuals carrying out ODD are also increasingly skilled, which has flattened the labor intensity of servicing both large and small tickets.
For operational due diligence, Centaur believes that it’s now less about size and more about jurisdiction. Funds are now operating in jurisdictions which are new to them and they need guidance in navigating the differing local requirements. This increasing need for cross-domicile services has had a positive effect on our business as we provide administration services throughout North America and Europe.